Who will attract investment in a multipolar world?

Across much of the developing world, robust growth will be associated with high investment rates. Under the gradual convergence scenario, Brazil, India, and Russia, together, will account for more than 13 percent of global investment in 2030, more than the United States. Among high-income countries, relatively strong institutions and continued technological advantage will mean that investment rates remain fairly stable, at around 17 percent of output. In terms of volumes, investment in the developing world will reach $15 trillion (in 2010 dollars) versus $10 trillion in high-income economies. China and India will be the largest investors among developing countries—the two countries combined will represent 38 percent of the global gross investment in 2030, versus 40 percent in all high-income countries combined—and will account for almost half of all global manufacturing investment.

The future patterns of investment will entail not only geographic shifts but also sectoral ones. As countries become richer, demand shifts toward services. However, whether investment in the services sector rises concomitantly depends on the capital intensity of services. In the gradual convergence scenario, services as a share of total investment in developing countries will grow from 57 percent to 61 percent. This shift will likely be realized alongside demographic changes that will increase demand for educational, health, and infrastructural services, as well as a global move toward greater trade in services and a larger share of services being embedded in tradable goods.

A strong flow of investment into services will be evident in infrastructure. Measured in terms of value, infrastructural needs will be largest in developing East and South Asia in light of population growth pressures and rapid increases in per capita income. Even exempting maintenance costs and replacement investments, fully meeting anticipated population coverage targets will result in a global infrastructure bill for developing countries that amounts to about $866 billion annually in 2030 (in 2010 dollars), constituting about 10 percent of all services investment in developing countries. In Sub-Saharan Africa, where infrastructure needs are especially acute, it will amount to as much as 23 percent of total investment.

The increased significance of developing countries as global investors will lead to a redistribution of the world stock of capital. In the gradual convergence scenario, by 2030, half of the global stock of capital—$158 trillion (in 2010 dollars)—will reside in the developing world (see figure below).

Note: Capital stocks are presented in trillions of 2010 U.S. dollars, calculated using a perpetual inventory method with a constant depreciation rate of 5 percent.The more-equal distribution of the capital stock between countries does not imply, however, that such redistributive shifts will be replicated within countries. Indeed, wealth in developing countries is highly concentrated among upper-income households. Data at the household level show that the least educated groups tend to have the lowest lifetime income and low or no savings, suggesting an inability to improve their earning capacity and, for the poorest, to escape poverty traps. If the distribution of education amongst workers of future generations were to remain as unequal as today, this would perpetuate inequality of earning capacity, saving and wealth in the future. Leveling the playing field in terms of educational opportunities could thus be supported not just in terms of fairness but also – given the positive effect on private saving – in terms of efficiency. In Mexico, for instance, augmenting demographic projections with educational attainment yields an economywide saving rate in 2050 that is almost 5 percentage points above a scenario that does not take into account the impact of changes in education (see figure below).